Branch Banking: Change the Mindset from 'Survive' to 'Thrive'

In the first article of our four-part series we explore why branches still matter in a world dominated by mobile devices.

It goes without saying that the branch experience has changed drastically over the past century and even more so with significant advances in technology in just the last decade. With walk-in traffic electing to embrace home and mobile banking options, several leading banks are directing their focus and attention on investments that improve the digital experience to complement, not compete with, emerging consumer preferences. Despite the recent trends, we still see opportunity for branches to thrive alongside these non-traditional banking channels in the near-term and long-term.

In this blog series, we will provide perspective formed while working with leading financial institutions on retooling their branch functions and applications to better serve customers. Join us for this series and learn how to recalibrate the discouraging mindset with lessons from leaders.

Increased usage of non-traditional retail banking channels like online, mobile, tablet, telephone banking, and others has led to the misconception that branches are becoming a thing of the past. Branches represent a valuable retail channel for the client, particularly as banks look to increase wallet share through offering wealth and investment management services. Branches should not only remain a priority going forward, but require investment to adapt itself to the changing needs of the next generation living a 21st century lifestyle.

An investment in this channel can allow a bank to transform traditional brick and mortar locations from a transaction processing center into an intimate and friendly spot where branch associates build long-term relationships with their clients, looking beyond the immediate transaction to the broader context of what real service entails. For example, Bank of America's acquisition of Merrill Lynch has now led to referrals as part of the account origination process across the footprint. Branch employees are able to schedule meetings for clients in the branch to discuss full financial goals with those licensed to provide financial planning and investment advice.

Banks are typically careful when developing their overall strategy while assessing investment options for the branch environment. What should be considered is the value of the land that their current investments occupy. While considering downsizing branches, becoming leaner and more automated, are leaders thinking about re-leasing space that is no longer occupied? Serious due diligence on security access and brand reputation should be assessed prior to reducing square footage in branches. When square footage is scaled back, what are the popular, secure, and profitable uses for the space? Examples include presentation spaces for local businesses to endorse relevant services that in turn could promote increased bank usage-realty, financial literacy, and debt management. There are a lot of options worth vetting to capitalize while property values rise.

Omnichannel is here, and branches play a key role representing the personal brand and human touchpoint. All channels are evolving rapidly to better serve customers, taking lessons from retail, and it is a challenge to keep up with the latest advancements. Rather than continual exhaustive upgrading to ensure branches offer everything, branches should offer the right things based on what customers need.

Product alignment to the physical channel should be conducted to provide analysis on how this channel and others align to their overall vision for serving customers. While branches may not offer everything through their applications, they should have access to all the tools customers use to access them and ensure branch employees are ready to troubleshoot during the product lifecycle for non-branch oriented offerings.

By taking the time to identify what the benefits are to customers across each channel, banks will gain a better understanding of how the branch fits into the customer's relationship with the enterprise. According to Celent report, Branch Banking in a Multichannel World, as of July 2010, banks viewed the branch as the highest priority channel for investment going forward. Due to the extended project duration and challenges to secure funding, branch investments made in 2010 by Innovators and Early Adopters are currently being executed, while the majority who faced project complexity and funding challenges are still determining when or how to begin impactful branch initiatives.

Let's not forget that branches play a vital role in revenue generation and customer retention:
- ATMs typically cannot accrue the revenue generating high dollar loan applications and investment advice that people garner
- Irate customers continue to walk into a branch to look for a resolution
- Branches serve as the main location for consistent revenue generation that is attributable to staff who understand financial markets and engage with customers on an immediate, face-to-face basis
- Tellers and bankers still serve as the face of the bank for the majority of the customer base, particularly for those who are unwilling or unable to adopt online/mobile technology as their primary means of banking
- Branches are a primary location to facilitate referrals either within or outside the bank

It seems clear that branches remain to serve an important role in the success of a bank, but what could be done to maximize relevance and minimize redundancy? With investments in branch technology and front-end processing, the retail banking channel can be better equipped to improve relationships, gather more knowledge about customers, as well as cross-sell and serve like never before. Incorporating tools and methods to create this setting generates significant ROI and ensures that branches remain relevant as channels evolve.

Our experience working with leading banks has culminated in the perspective that maximizing face-to-face contact in the branch is a primary reason for having branches in the first place. Implementing technologies to handle as much of the operations as possible while arming the staff with rich customer data produces best of class service along with better chances for increased wallet share.

Evan Pliskin and Priya Gupta are senior consultants at Capco, and Lane Martin is a managing principal at Capco.

I agree, branches will always play an important role in the banking ecosystem, it's just that they will have to change and adapt like anything else moving forward. Mining data to enable branch staff to better serve customers is essential going forward.